Changed Foreclosure Picture Still Presents Opportunities

The foreclosure situation is a good deal different from what we were discussing a few years ago when the tidal wave of 7.3 million foreclosures and short sales swept the nation. When The New York Times “Dealbook” recently pronounced that the supply of cheap foreclosed homes in America is dwindling, it came as news to…well, no one.

Let’s face it: investors wouldn’t need to look up the latest statistics to guess that number of offerings would be down. The continuing rebound in home values, slow but steady improvement in the overall economic picture, and even just the passage of time has to mean that the glut of subprime-crisis-era foreclosures would have worked their way through the system. 

But there are always new foreclosures, and for anyone hoping to make a bargain buy in today’s foreclosure market, the same qualities that brought post-crisis success still apply today:

• Knowledge of (or willingness to research) comparable neighborhood values
• Realistic appreciation of rehabilitation costs
• Decisiveness (willingness to act swiftly)
• Ready access to investment capital

The principal difference in today’s foreclosure milieu is that far fewer are available, and the difference between market value and listing price has narrowed. There may be fewer competitors to worry about, but some are still out there, as always. Today sees fewer institutional investors—in fact, some are leaving the market altogether, taking their profits and selling out to groups more committed to long-term property management.  

Aside from the qualities described, there is still no blanket formula for landing the best foreclosure deal. But among other observations, there are two that are worth considering.

First, despite the lessening of the impact institutional investors previously had on the market, it may still be necessary to prepare to offer more than the listed price. The dwindling number of foreclosed homes tends to create an imbalance between supply and demand. If other buyers are offering higher amounts than the asking price, it can easily result in a bidding war situation. As always, by researching underlying values, the best investors avoid foreclosure buys that wind up being little more than break-even propositions.

Another wrinkle to be aware of is the possibility of future cost increases. For instance, it can transpire that an investor succeeds in purchasing a property significantly below its true value, only to find that a reassessment by taxing authorities raises its property tax bill through the roof! Canny investors prevent this surprise by finding out how the local Assessor’s office sets rates and schedules appraisals.

The foreclosure picture changes constantly. If you are interested in the investment possibilities—or are looking for a buy on your next home—don’t hesitate to give me a call to discuss the latest offerings! You can reach me on my cell phone: 812-499-9234 or email Rolando@RolandoTrentini.com

6 Factors Guide Investors to Profitable Rental Property

 Just about any investor on the lookout for a promising rental property has a number of assumed criteria in mind—often arrived at without bothering to sit down to list them. Remember, this is already a successful individual, usually with ample business experience—and always with the financial acumen to be able to make a substantial investment. For them, creating a written decision matrix really isn’t necessary.

Still, there’s a lot of literature on the web offering opinions on what are the most commonly agreed-upon factors for choosing a rental property. Quite a few “Top 10”s. Going over them, it turns out that some are only slight variations on a single theme, so I’ve boiled them down to a “Top Six.”

The first one is barely ever mentioned. It’s this:

1. Most investors have predetermined the price range that his or her rental property must fall into, but that can turn out to be a false step. If the goal is to garner the maximum return, it’s possible that some humbly-priced rental properties can actually turn a greater annual profit—even in absolute dollars—than some higher-end homes (particularly those that suffer extended periods without suitable higher-end tenants). So Number 1 is SET YOUR INVESTMENT GOAL. Cash flow return can be a very different goal than long term property appreciation.
2. LOCATION LOCATION LOCATION.  This is the one that combines a half dozen factors, variously listed as Neighborhood, Proximity to Jobs, Amenities (parks, malls, gyms, movie theaters, public transportation hubs, etc.), Crime, Schools, and even Property Taxes. This factor might be chosen for convenience, as when a rental property investor wishes to be able to supervise the property; or for an expectation of value appreciation in an area which is gaining popularity. As everyone has had heard from time immemorial, L.L.L. is always important!
3. HEALTH OF THE PROPERTY. If the underlying structure and mechanicals have been intelligently designed and well maintained, this one is of no importance. If not, a thorough inspection with top-grade recommendations and cost projections is a must.
4. VACANCY RATES. The number of rental homes listed and the number of vacancies should be considered highly important for determining a promising rental property. In newly expanding communities, sometimes you can spot a man parked near an intersection, clicking away on a counter as the autos pass by. He’s measuring traffic to see if the volume is great enough to support a gas station, or market, or mini-mall. The turnover of rental listings—how long rental properties stay vacant from week to week—can provide guidance about the same kind of information.
5. COMPETITIVE MARKET. The average rent amounts advertised for comparable properties can be the decisive factor for whether a rental home investment makes financial sense.

 Of course, another factor that can make a big difference is the experience level of your Realtor^®. That’s actually key factor #6—and (I hope) where I come in! You can call me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com so we can discuss your real estate needs.

Sharp-Eyed Prospects Prepare to Find Affordable

Despite the improving economic outlook, for many families, finding an affordable house can still be a challenge. According to a study by the Joint Center for Housing Studies at Harvard University, more than a third of today’s families have had to devote at least 30% of their combined household income to the monthly mortgage payment—and that figure exceeds the generally accepted standard. In other words, even though mortgage interest rates remain pegged at historically low levels, landing an “affordable” house (just as in the rest of the country) can take some doing. Here is one five-step approach that has rewarded house-hunters in the past:

1. Define Affordable House in dollars   

The first step to finding an affordable house should be to work out a target budget. The Wall Street Journal currently recommends spending no more than 28% of monthly income on your house). Make sure to include additional fees such as legal fees, repairs, maintenance, and closing costs in your calculation. The bottom line you come up with isn’t one set in stone, but it’s a reasonable goal to have in mind.

2. Set space requirements

Space will be a prime consideration for the entire time you'll be living in your home. If you are planning on expanding the family in the near future, having a spare room is close to a necessity. If it's just something that would be nice to have, it’s not a requirement—and recognizing the distinction can be all-important.

3. Balance travel time against housing costs

Often you can offset the purchase price of a home by expanding your search radius to include a reasonable commute. Get out your pencil: you'll need to compare the savings in the house payment against the additional cost of an extended commute.  

4. Include properties that need some TLC

One of the best ways to zero in on an affordable house is to keep an eye out for otherwise-eligible "fixer-uppers." You can avoid any serious structural problems, such as plumbing, electrical, and roof issues, yet still focus on properties that just need a little cosmetic revamp can put you across the affordability finish line.

5. Investigate home buying programs

In a limited number of instances, there are some generally underpublicized home buying programs that might be available. For instance, there is the Good Neighbor Next Door program. For teachers, medical professionals, firefighters, and law enforcement officers looking in revitalization areas, as much as a 50% discount from a HUD-listed property can make a house more than affordable!  

            Most observers believe residential prices are likely to continue to rise—so it’s not outlandish to suspect that today’s affordable houses may become less so as time passes. Give me a call if you are thinking of taking advantage of this winter’s bargains in our area.  You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com

4 Reasons Real Estate Investments are Worth a Look!

Good investors tend to be cautious souls. For those who prior to 2007 had never ventured into the realm of real estate investments, the ensuing downturn might have been enough to discourage any curiosity about that direction (even if their other investments had also suffered during the global financial crisis).

Nonetheless, at this juncture those same cautious investors might well assume that the value of real estate investments have rebounded so substantially that it’s now too late to bother looking into them. But as National Public Radio has just pointed out, there's an excellent argument to be made that conditions are now highly conducive for real estate—with real estate investments being no exception. I could tick off three solid reasons that immediately leap to mind, but stand corrected: NPR points to four:

1. Employment. Employers are hiring anew, and “when companies are hiring, would-be homebuyers feel more confident about taking on mortgage debt.” Unemployment rates have (finally!) come down to 5.6%, and with employers having added 252,000 jobs in December, consumer confidence is up nearly 20% over a year ago.

2. Prices seem more rational. NPR points out that from January to October, prices rose 4.5% nationally; a “subdued” gain compared with the 11% burst of the year before. They project that the slower price appreciation may have set the stage for a “buying surge in 2015.” From a local real estate investments standpoint, too, gains from last year’s run-up in equities markets combined with mortgage rates still holding below 4% would seem to create the key elements many investors would consider favorably.    

3. Demand for rentals is high. There is a healthy demand for rental accommodation across the country due to a tight supply of quality accommodations. USA Today tells us that between 2009 and 2013, the national vacancy rate for apartments dropped from 8% to 4.1%. Over the same period, the effective rent increased by 12% to $1,083. As one potential consequence vis-à-vis real estate investments, new landlords might expect to be more selective about the tenants that they choose. That would mean fewer headaches for landlords with troublesome and slow paying tenants. It is might also portend that investment properties will stand vacant for briefer periods.  

4. Millennials are sick of Mom’s basement. NPR points to a Census Bureau report that says only 36% of Americans under age 35 own a home, down from 42% just seven years ago. The recovering employment picture might not enable young people to save up for a down payment for a while yet, but renting quality digs should soon be more doable than was previously the case. That could set the table for a continuing robust rental environment, with real estate investments benefitting proportionately.

NPR’s four reasons for optimism in 2015 are actually only the tip of the iceberg. If you have ever had the thought that it could be worthwhile to take a look at real estate investments, this is a great time of year to give me a call! You can reach me on my cell phone 812-499-9234 or email:Rolando@RolandoTrentini.com